Council cool to loan proposal

July 18, 1995|By James M. Coram | James M. Coram,Sun Staff Writer

The county's economic development director got a rude reception last night when he told County Council members that he was present as "a courtesy to the council" to talk about plans to lend a private company $900,000 this fall and back the loan with taxpayer dollars.

Councilman C. Vernon Gray was unimpressed. He told Richard W. Story, executive director of the Economic Development Authority, "We're here talking about the full faith and credit of the county government" as backing for the loan. "That's a little more than courtesy, I would think."

Mr. Gray, an east Columbia Democrat, asked Mr. Story if the director wanted to retract his remarks.

Mr. Story said he did not. He said his act of courtesy was to tell the council two months early about the kind of loan County Executive Charles I. Ecker is proposing for Marble Source Unlimited, an Annapolis Junction company that specializes in manufacturing natural stone products. Howard is one of three counties in the state never to have made loans to local businesses under the Maryland Industrial Land Act, he said.

The act allows counties to use their taxing power as collateral to borrow money from the state and lend the money to local businesses at an interest rate slightly higher than the state charges the county, Mr. Story said. Mr. Ecker hopes to borrow $900,000 at an interest rate of about 6 percent and lend it to Marble for 15 years or 20 years at 7 percent, Mr. Story said.

The executive is not asking the council to approve the loan now, Mr. Story said, but is merely seeking endorsement. The request for council approval of the loan will come in September, he said.

"Suppose we said,'No,' " to the endorsement of the loan. "What )) would happen then?" Mr. Gray asked.

"It would be an indication of the reception we might receive in September," Mr. Story said.

Mr. Gray noted that the county offered a similar loan to Savage Mill Limited Partnership in 1990 only to see the partnership declare temporary bankruptcy last year and put repayment of its debt to the county on hold for the next three years.

Although the Marble situation is different, it bothers him that Marble's primary client appears to be the Hechinger hardware ++ chain, Mr. Gray said.

"Hechinger's is having a little difficulty" from increased competition, he said. "Should this market dry up, where do we go from here?"

Mr. Story said a citizens board is looking into that question and has asked for financial statements from Marble about the company's credit worthiness.

Democrat Mary C. Lorsung of west Columbia said she would like to have that information by Monday when the council votes on the request.

"One of the concerns I have, frankly," she said, "is once having endorsed a program -- if that should happen -- it makes it more difficult to back off at the next step."

Story said endorsement of the loan now does not commit the council to approving it later. "This council is known to be independent" when it comes to financial matters, he said.

Republican Darrel Drown of Ellicott City wanted to know what kind of reception one of Marble's competitors would have if the competitor asked for a $900,000 loan also.

Mr. Story said a competitor would be treated similarly. "This [request for a county-backed loan] is a test," he said. "We want to see how this works."

Mr. Drown said he had a problem with "subsidizing one company and not the thousands of others" in the state. "In the long run, should government be in this business?" he asked.

Mr. Story said the proposed loan would be a "good test of that question."

Republican Dennis Schrader, who represents the district in which Marble and Savage Mill are, praised company President John J. Congedo for doing business in Howard County and applauded Mr. Story for coming up with the loan idea.

"The only way to regenerate our business base is to do those kinds of things," he said.

Mr. Schrader defended the Savage Mill loan, saying the mill make-over as a shopping center is "of enormous value in terms of enhancing the quality of life" in the southeastern part of the county. He said bringing jobs to the county is a better deal than "spending millions of dollars on empty farmland."

After the meeting, Mr. Story said he would provide answers today to all the questions council members had asked "except the philosophical one of 'Should we do it?' "